Should I Create a Trust?
Regardless of your age or whether or not you have children, you should be thinking about estate planning and the steps you should take with assistance from an estate planning attorney. One of the estate planning topics you may be considering is whether to create a trust. There are many different types of trusts that can be established in New York, and each of them serves different functions. You should consider some of the following questions as you think about whether it would make sense for you to establish a trust based on your estate planning objectives.
Do You Want to Allow Your Beneficiaries to Avoid Probate?
One of the most common reasons for creating a trust is to allow your beneficiaries to avoid the complicated, and often expensive, process of probate. Under New York law, nearly all types of assets in Revocable Living Trusts do not need to go through probate. More specifically, if you transfer your assets into a RLT, such as a bank account, brokerage account or real estate assets, those assets do not need to be probated in order to pass through to your beneficiaries. Accordingly, if one of the major reasons you are considering the creation of a trust is to avoid probate, then a Revocable Living Trust is the estate plan for you.
Do You Want to Protect Your Assets in the Event You Ever Go into a Nursing Home?
If asset protection is your main concern, then you should consider establishing an Irrevocable Income Only Trust. In addition to avoiding probate similarly to a Revocable Living Trust, the IIOT also protects your assets (after a five year look back period) in the event you had to go into a nursing home and apply for Medicaid benefits. This irrevocable trust is a great tool to keep assets in the family.
Do You Want to Avoid Taxes on Life Insurance Assets?
If you have a particularly substantial life insurance policy and you are concerned that your beneficiaries will be taxed significantly on the life insurance payout when you pass away, you can establish an Irrevocable Life Insurance Trust. With an ILIT, your life insurance essentially comes out of your estate and goes into the trust. You will need to establish this trust in your lifetime, and you will not be able to make changes to the trust or to dissolve it. When you pass away, the proceeds from your life insurance will go into the trust and may not be subject to estate tax.
Do You Have a Child with Special Needs?
If you have a child with special needs who will rely on Medicaid and/or Supplemental Security Income (SSI) benefits for the duration of his or her life, a Special Needs Trust can allow you to provide that person with funds without affecting that person’s eligibility for SSI benefits or other types of government benefits. Funds in a Supplemental Needs Trust are used to supplant the lifestyle of the beneficiary, which can cover expenses that his or her government benefits do not cover, such as education, care givers and/or entertainment, among other things.
Contact an Estate Planning Lawyer in Mahopac
If you have questions or need advice about creating a trust in New York, one of our experienced Putnam County estate planning attorneys can speak with you today. Contact Meyer & Spencer, PC to learn more about how we can assist you with your estate planning needs.